It's already another year and Valentine's Day is around the corner again. So this year, I thought I would talk about “THE MERGE” of finances (or not). A lot of questions about money arise when two people are living together as a couple under the same roof and sharing the same bills. Personally, my hubby and I use of combination of the “separate” and “combined” strategies. We each have our own RRSP and TFSA accounts through Questrade, as well as our own “play money” accounts (check out our recommendations for $0 basic online bank accounts) but we keep a joint Tangerine chequing account for combined expenses. Basically what this means is that we each put in a matching amount of money every month and then all of our combined household expenses get automatically paid out of this pot. It seemed fair from Day 1, and it has worked pretty well for us so far – but that doesn't necessarily mean that it's a one-size-fits-all solution.
The decision to keep separate accounts or have all the bills and paychecks going into one joint account is different depending on each couple's needs and wants. Considering the fact that the major reason couples argue is all about money, this is a very important decision to make as a couple. As a side note, I think it's interesting that the phrase “getting financially naked with your partner” is now becoming a thing. I'm not sure exactly what it says about our modern society that we appear to be much more concerned and self-conscious about our money management skills than our *ahem* bedroom skills, but it's certainly a reality from what my circle of friends has experienced.
There are a lot of things to think about when deciding between one joint account or to have separate accounts – and of course the multitude of in between options.
Seeing as I haven't made a pros and cons list in a while, I thought I would make one to highlight the options in order to facilitate better decision making.
PROS of a Joint Account:
- Less hassle (money comes in, money goes out from one account)
- Less time needed to figure out the month to month expense tracking
- Can be considered the “epitome” of a united cohesive relationship, the “what's mine is also yours” mentality and that is “our money” instead of “my money”
- Less confusing
- More egalitarian– if one spouse doesn't make as much as the other spouse, the lower income spouse will benefit
- Will be easier to do taxes (I think…!)
- If you have one credit card linked to it, then that's double the effort in collecting travel reward points
- If one partner makes most of the credit related decisions, then they will never develop a good credit score (get your free Borrowell credit score)
CONS of a Joint Account:
- There might be more squabbling about money– more decision making together about expenses. I read somewhere that large proportion of spouses reportedly hide their big shopping items from their other spouse, so for this reason, one joint account might not be a good idea (unless you have EMT training)
- You can't really surprise each other with gifts- all the expenses will be seen on credit card bills or with online banking
- This is somewhat trivial, but gifts to each other will seem kind of weird because you're using the same pot of money…
- There might be some power-tripping if one spouse makes more than the other and contributes mostly to the joint account
- The spending style of each individual in the couple has to be considered- if one is a spendthrift and the other is a tight wad, a lot of arguing and disagreements are guaranteed to ensue
- If your partner is Spendy Mcspend, you run the risk of losing your share of the money (and then some) if they can't control their credit card spending
- If all the money is put into one basket, it may be even harder to differentiate between money if you break up
PROS of a Joint Account in Conjunction with Separate Accounts
- You can maintain your individuality– like if he wanted to buy that 55″ TV with his own money, it's not really my right to tell him not to (besides, nagging about money is not sexy)
- Different spending styles can be maintained, as long as the money to pay bills as a couple is available
- You can still maintain your credit score with your own account as a buffer
- It can be a good first step before joining together for one account
CONS of a Joint Account in Conjunction with Separate Accounts
- It can be a hassle to remember to deposit money from your own banking account to the joint account
- Depending on your banking plan, you may rack up banking fees (like for email money transfers, or too many transactions) over time
- Record keeping– so many accounts, so little time to keep track of them all
- If you make less then them (e.g. on maternity or paternity leave, unemployed, going back to school) it may be hard to keep money flowing into the joint account
So considering all these factors, what should you decide to do? The truth is that no online writer can tell you what sort of personalized solution will work best for you. It really comes down to the personalities and beliefs that you and your partner have when it comes to looking at your wealth and earning capacity as a couple. I don't think there is a right or a wrong answer. Except for not talking about it at all – that's definitely the wrong answer!
I have a friend who had separate accounts with her boyfriend at first, and then they decided to cancel all the separate accounts and create one joint account (again, through Tangerine to get the $100 bonus) together for the above reason: one would forgot to put enough money for the mortgage payment, and the other would forget the next month. It was too much of a hassle for them. They also got married too. 🙂
Another option that might work well is to have one MAIN joint account where the paycheques come in and where the payments go out (so it will be hassle free), and then pay yourselves automatically a set amount into your own separate bank accounts each pay cheque or whatever is convenient.
Whatever the case, communication and set rule and guidelines are key…Making sure you have the same values and spending styles before you get together doesn't hurt too.
Readers, do you have joint or separate accounts with your partner/ spouse? Which do you prefer and why?
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